SEC.gov | “Pro Bono Publico” Prepared Remarks before the Peterson Institute for International Economics

The Nugget

Reliable, accessible financial disclosure is crucial for maintaining market confidence and preventing contagion in times of crisis, as it functions as a public good essential for informed decision-making among investors and stakeholders.

Make it stick

📊 Pro bono publico means acting for the public good, emphasizing the importance of public disclosures in finance.
🔍 Adam Smith believed that reducing the price of information benefits the entire economy; consistent reliable data is essential.
🔄 Transparency in financial disclosures helps mitigate risks and avoids the "lemon market" problem where only poor-quality assets prevail.
⏰ Timely disclosures post-restructuring are vital; ideally before markets open in Asia, to regain trust and maintain clarity.

Disclosure serves as a public good, ensuring that all market participants have the needed information to make informed decisions. This is critical during financial crises, as misinformation can lead to wider economic impacts.

Following a restructuring, financial institutions must disclose detailed information to several key stakeholders:
1. Securities holders (investors in bonds and shares).
2. Counterparties in financial transactions (like swaps and repos).
3. Depositors, especially those without insurance, are keen to assess risks.

Historical financial crises show that an absence of credible disclosures can trigger wider market failures. Gensler references past events (like Barings Bank's collapse) illustrating the necessity of transparency to prevent a liquidity crisis.

Gensler underlines that financial institutions must comply with U.S. securities laws, ensuring that disclosed information isn't misleading and that it meets market expectations beyond legal obligations.

Proactively preparing for disclosures during non-crisis times is essential. Agencies like the SEC advocate for structured resolution plans to facilitate timely information release when institutions face distress.

"Pro bono publico. For the public good."
"Reliable, comparable, accessible data benefits everyone."
"Without credible disclosure, a market unravels."
"Transparency is one indispensable step in regaining market participants' trust."
"Absent full disclosure, investors are left in the dark, reliant on speculation and rumors."

This summary contains AI-generated information and may have important inaccuracies or omissions.